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NY L81087




December 23, 2004

CLA-2-84:RR:NC:1:110 L81087

CATEGORY: CLASSIFICATION

TARIFF NO.: 8471.30.0000; 8471.60.5400; 8525.40.4000; 9801.00.2000; 9802.00.5060

Mr. David Soyka, Esq.
Sr. Manager, Global Trade Compliance
Celestica Corporation
9 Northeastern Blvd.
Salem, NH 03709

RE: The tariff classification of printers from China exported to Mexico for alteration and/or packaging; the eligibility for duty exemption under subheading 9801.00.2000 or subheading 9802.00.5060, HTSUS

Dear Mr. Soyka:

In your letter dated November 4, 2004, on behalf of Celestica Corporation you requested a tariff classification ruling.

The information provided indicates that certain printers will be manufactured in and imported in bulk from China into the United States. They are subsequently exported to Mexico where they undergo certain alterations and/or packaging before being reimported into the United States. They will be imported by Lexmark International, Inc. (Lexmark) from China, exported to Mexico, and reimported into the United States. The importer retains legal ownership of the goods. The legal relationship between Celestica Corporation and the importer is one of bailor to bailee. Celestica performs specific services on behalf of Lexmark. Celestica Corporation will take custody of the printers in Texas and exports them, on behalf of the importer, to a Celestica facility in Mexico. Lexmark sells to retailers such as discount chains. The printers will be customized and/or bundled with additional goods, parts and accessories based on their retail customer’s orders. As such, when returned to the United States, they are packaged for retail sale.

Scenario 1:

The first scenario is a simple pick and pack operation. Under this scenario the printers are put up for retail sale in individual cardboard boxes. They may be packaged with ink cartridges, adapters, CD-ROMs, cameras, palm pilots, paper, and a power cord. The retail packaging is secured shut and labeled. These retail packages are then exported to the importer in the United States and subsequently distributed to their customers (e.g. retailers, discount chains) for retail sale. In this scenario, the printers will not be advanced in value or improved in condition while in Mexico. In a fax dated December 17, 2004, you indicated that there are currently three setup or packaging operations:

The printer is packed with an instruction manual, a power cable, a CD-ROM and an ink cartridge. Sometimes a paper pack may be added to this setup. The printer is packed with an instruction manual, a power cable, a CD-ROM, an ink cartridge, a paper pack and a digital still image camera. The printer is packed with an instruction manual, a power cable, a CD-ROM, an ink cartridge, a paper pack and a palm pilot.

It is Celestica’s position that this operation qualifies the imported units for duty exemption under subheading 9801.00.2000. Subheading 9801.00.20, HTSUS, provides for duty-free treatment for “[a]rticles previously imported, with respect to which the duty was paid upon such previous importation or which were previously free of duty pursuant to the Caribbean Basin Economic Recovery Act of Title V of the Trade Act of 1974 if (1) reimported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad, after having been exported under lease or similar use agreements, and (2) reimported by or for the account of the same person who imported it into, and exported it from, the United States.”

It has previously been held that “bailment” is a “similar use agreement” for the purposes of subheading 9801.00.20 (see HQ 560511). Based on the information submitted, we find that the printers packaged in Mexico will be eligible for duty-free treatment under subheading 9801.00.2000, Harmonized Tariff Schedule of the United States (HTSUS), when returned to the U.S., provided the importer previously imported the printers; they are reimported by or for their account; and the documentary requirements of section 10.108, Customs Regulations, are satisfied. However, the duty exemption of subheading 9801.00.20 does not extend to the other items put up for sale with the printers. While not specifically pertaining to subheading 9801.00.20, T.D. 91-7, January 8, 1991, and Superscope, Inc. v. United States, 13 CIT, 727 F. Supp. 629 (1989) address the applicability of duty exemptions under various special classification provisions. The principles expressed appear to apply to the current issue. Only items that meet the terms of this subheading will qualify. While the printer itself may separately qualify for duty exemption under subheading 9801.00.20, the remainder of the articles are assessed duty at the Chapter 1-97, HTSUS, rate applicable to the article or articles.

Scenario 2:

The second scenario involves minor alterations to the printer. The printers will be customized based on the specifications of the retailer. Typical customizations may include changing pages per minute printing speed, bezels, decals, and firmware upgrades. Firmware upgrades result from program fixes for printing problems, modified user menus, and improvements in media sensors. Attaching the printer to a personal computer (PC) and downloading the current revision level completes the upgrade. The printer capabilities may also be altered by re-flashing printer firmware. Due to supply and demand, printers within the same product family may have their firmware re-flashed to mimic the capabilities of the specific model number ordered. The most common type of re-flash involves changing the pages per minute speed. In addition, these re-flashed printers will have the model number changed by replacing the bezel. After the printers undergo alteration, they are put up for retail sale in individual cardboard boxes. They may be packaged with ink cartridges, adapters, CD-ROMs, cameras, palm pilots, paper, and a power cord. The current setup or packaging operations are described under Scenario 1. The retail packaging is secured shut and labeled. These retail packages are then exported to the importer in the United States and subsequently distributed to their customers (e.g. retailers, discount chains) for retail sale. In this scenario, the alterations are minor with regard to cost and labor and do not alter the essential character of the printer. These operations as described do not destroy or alter the identity of the printer.

It is Celestica’s position that this operation qualifies the imported units for duty exemption under subheading 9802.00.50. Subheading 9802.00.50, HTSUS, provides for “[a]rticles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: [a]rticles exported for repairs or alterations: [o]ther.” 19 CFR 181.64 (a) says that “[f]or the purpose of this section ‘repairs or alterations’ means restoration, addition, renovation, redying, cleaning, resterilization, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.”

Based on the information submitted, we find that the printers will be eligible for duty-free treatment under subheading 9802.00.5060, HTSUS, when returned to the U.S. from Mexico, provided the documentary requirements of 19 CFR 181.64 (c) are satisfied. However, the duty exemption of subheading 9802.00.50 does not extend to the other items put up for sale with the printers. While not specifically pertaining to subheading 9802.00.50, T.D. 91-7, January 8, 1991, and Superscope, Inc. v. United States, 13 CIT, 727 F. Supp. 629 (1989) address the applicability of duty exemptions under various special classification provisions. The principles expressed appear to apply to the current issue. Only items that meet the terms of this subheading will qualify. While the printer itself may separately qualify for duty exemption under subheading 9802.00.50, the remainder of the articles are assessed duty at the Chapter 1-97, HTSUS, rate applicable to the article or articles.

The General Rules of Interpretation (GRIs) of the Harmonized Tariff System (HTSUS) governs the classification of goods put up in sets for retail sale. GRI 3(b) provides, in relevant part, that goods put up for retail sale shall be classified as if they consisted of the material or component which gives them their essential character. The Explanatory Notes (ENs) of the HTS provide guidance in the interpretation of the Harmonized Commodity Description and Coding System at the international level. According to the ENs for GRI 3(b), “goods put up in sets for retail sale” refers to goods which: consist of at least two different articles which are, prima facie, classifiable in different headings; consist of products or articles put up together to meet a particular need or carry out a specific activity; and are put up in a manner suitable for sale directly to users without repackaging.

It is noted in Scenario’s 1 and 2 that the printers will be packaged with software in the form of a CD-ROM, which must be classified in accordance with Legal Note 6 to chapter 85. Note 6, states: “This note does not apply to such media when they are entered with articles other than the apparatus for which they are intended.” The CD-ROM software must be installed into apparatus other than the printers and other articles imported with these sets. Accordingly, since the CD-ROM is entered with an article other than the apparatus for which it is to be installed, the CD-ROM software need not be separately classified.

As described (see setups/packaging under Scenario 1) the printers are combined with other goods and “put up in sets for retail sale.” As described each setup appears to meet the requirements of GRI 3(b).

In the first set, the printer provides the set with its essential character. Therefore, the applicable subheading for the first set, as described above, will be 8471.60.5400, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “[a]utomatic data processing machines and units thereof[i]nput or output units[p]rinter units: [a]ssembled units incorporating at least the media transport, control and print mechanisms: [i]nk jet.” The rate of duty will be free. The printer may be entitled to duty free entry under subheading 9801.00.2000 or 9802.00.5060, HTSUS, under the circumstances described in Scenario 1 or 2, provided the documentary requirements are met.

In the second set, the digital still video camera provides the set with its essential character. Therefore, the applicable subheading for the second set, as described above, will be 8525.40.4000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “digital cameras[s]till image video cameras and other video camera recorders: digital cameras: [d]igital still image video cameras.” The rate of duty will be free. The printer may be entitled to duty free entry under subheading 9801.00.2000 or 9802.00.5060, HTSUS, under the circumstances described in Scenario 1 or 2, provided the documentary requirements are met.

In the third set, the palm pilot provides the set with its essential character. Therefore, the applicable subheading for the third set, as described above, will be 8471.30.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “[a]utomatic data processing machines[p]ortable digital automatic data processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display.” The rate of duty will be free. The printer may be entitled to duty free entry under subheading 9801.00.2000 or 9802.00.5060, HTSUS, under the circumstances described in Scenario 1 or 2, provided the documentary requirements are met.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Eileen S. Kaplan at 646-733-3016.

Sincerely,

Robert B. Swierupski
Director,

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